### IN THE COURT OF APPEALS OF TENNESSEE AT NASHVILLE JUNE 12, 2000 Ses sion
STATE OF TEN

NESSEE, DEP

ARTMENT OF

TRANSPORT

ATION v. SUNSET MARINA AND RESORT, INC., AND TONY SLOAN
Direct Appeal from the Circuit Court for Pickett County No. 789; The Honorable John Maddux, Judge ,

No. M1999-00880-COA-R3-CV - Filed October 12, 2000

This appeal arise s out of what can loosely be defined as a condemnation case. The State of Tennessee, acting thro ugh the Department of Transportation, received an easement from the Corps of Engineers for

the purpose

of bui ldi ng a b rid ge ac ros s Da le H oll ow La ke i n Pi cket t Co unt y, Tennessee. The bridge was to be built across land owned by the United States and operated by the Defendants

as a resort and marina under a lease for commercial purposes. The State filed a Petition for Condemnation against the leaseholder i n the Pickett County Circuit Court seeking to take the land under its power of eminent domain. The trial court determined that the State could not

take the land based on the Supre mac y Clause of the United States Constitution. However, the State had already begun work on the project , and, ulti mately, the bri dge was completed. The court held a trial to determine the damages which the leaseholder had suffered as a result of the bridge being placed
across the leasehold. The trial court granted a partial directed verdict and awarded the leaseholder $287,115. The trial court also awarded the leaseholder $100,000 as attorney s’ fees in lieu of injunctive relief. The State appeals from thepartial directe d verdict and the a

ward of attorne

ys’ fees.

Tenn. R. App. P. 3; Appeal as of Right; Judgment of the Circuit Court Affirmed in Part, Reversed in Part

A LAN E. H IGHERS , J., delivered the opinion of the court, in which D AVID R. F ARMER , J., and H OLLY K IRBY L ILLARD , J., joined.

Paul G. Summers, Attorney General and Reporter, Michael E. Moo re, Sol icitor General, William E. James, Senior Counsel, for Appellant Jon E. Jones, Phillips M. Smalling, for Appellees1 Ther e i s no is sue in r ega rds to t he t ran sfe r of the le ase , an

d we w ill a ss ume that it was va lid in all respects.
2 This argument bas

icall y objected t

o the Stat

e’s use of

a condemnation proceeding to t ake landbelong ing to (continu ed...)
-2- OPINION

The State of Tennessee app eals fromthe judgment of the Pickett County Circuit Court. For the reasons stated he

rein, we affirm

the trial court in p

art and reverse

in part. Facts and Procedural History

In the l ate 1940's , Mildred Harrison, d/b/a/ Sunset Boat Dock, entered into a “lease for commercial concession purposes” to operate a commercia

l re sort and boat dock on Dale Hollow Lake. The lessor was theCorps of Engineers, and the underlying fee wa s held by the Secretary of the Army for the United States of America.

On July 28, 1993, the Secretary of the Army granted the

State of Ten nessee, act ing through the Department of Transportation (hereinafter referred to as “the State”), a “Second Supplemental Easement” to an unnumbered easement dated “31 October 1949" for the relocation of Sta

te Route 42 upon, over, and a

cross governme

nt o w ned lands within the Dale Hollow Dam a

nd Reservoir project in Pickett County, Tennessee. At leas t part of the land c ontemplated by

the easement fe

ll within the leasehold of Mildred Ha rrison. Paragraph 16 of the Second Supplemental Easement providedthat

the easement was granted subject to the lease of Mildred Harrison, and it would be the responsibility

of the State to reach an agreement with Mildred Harrison for compensation for damages resulting from the State’s use of the granted right-of-w ay.
On November 5, 1993, the State filed a Petition to Condemn against Mildred Harrison, d/b/a SunsetBoat Dock. In its complaint and attached exhibit, t he State so ugh t to condemn Mildred Harrison’s entire leas ehold inte rest for the purpose of b uilding a br idge across Dale Hollow Lake. An order of possession purporting to transfer the e ntire leasehold in

terest of Mildred

Harrison to

the State was entered on November 17, 1993.

On Janua ry 6, 1994, Sunset Marina and Resort, Inc. filed a motion to intervene in the condemnation pro ce eding filed by the State against Mildred Harrison. The motion alleged that Mildred Harrison had

assigned all of her right, title, and interest in the leasehold to Sunset Marina andResort, Inc. The parties entered an agreed order o n November 28, 1995, substituting Sunset Marin a and Resort, Inc. and Tony Sloan (“Appellee” ) as party defendant in the place of M ildre d Harrison. 1

The Appellee answered the complaint and asserted various arguments as to why the State’s petition for condemnation could not be sustained. First, the Appelle e argued that the proposed condemnation was illegal under the Supremacy Clause of the United States Constitution. 2 Also, the2 (...continued)

the United States.

3 The State conced ed that it had no right to take any interest of the Appelle e excep t for the im provem ents.
4 The State cont

ends that its re

fusal t o offer proof

was based on it

s belief that t he trial court did not

hav e (continu ed...)
-3- Appellee argued that the

condemnation was

a violation of the language of the conditional easement granted to the State by the Corps of Engineers bec

ause the State fa

iled to obtain an ag

reement with Mildred Harrison or the Appellee regarding compensation for the taking. Based on these a rguments, the Appellee filed a motion for injunction, aski ng the tri al court to enjoin the State from entering onto the leasehold and to prohibit all further construction activity. During pretrial proceedings, the partiesdiscovered that the original complaint had sought to take Mildred Harrison’s entire leasehold and concession. The State asked the court’s permission to withdraw its

original petition and to file an amended complaint. The permission was granted, and the State filed an ame

nded petition in whic

h it sought to take c

ertain improveme

nts located within the area of construction, namely a cedar duplex cabin which was removed

in order to place a support pillar for the bridge. 3

On April 8, 1996, the parties appeared before the trial court for determination of title to the improvements

sought to be acquired by

the State and on the motion for injunction. At the conclusion of the hearing, the trial court ruled that the State had no right to condemn the property because it had failedto obtain an agreement with the Appellee or the Appellee’s predecessor. The court also ruled that the Supremacy Clause of the United States Constitution pr

ohibited the State

from condemning
a lease granted by the United States of America. The court vacated the order of November 17, 1993, which purported to tran sfer the entire l

easehold intere

st to the State, and denied the State’s application for a new order of possession

. Finally, the trial court announced that an injunction would be entered on May 15, 1996, prohibiting further construction on the bridge. At that time, the bridge was under construction, and o ver t welve million dollar s ($12,000,000.00) , approximately three-fourths of the total estimated cost, had been expended toward completion of the project.

The Appellee subsequently withdrew its request for an injunction, and asked the trial court to determine and award damages in lieu of injunctive relief. The Appellee asserted that the measure of damages should b

e based on a consi

deration of both: 1 ) the cost to the Sta te to find and construct
an equally fe

asible and adequate alternative location for the bridge and roadway and 2) the value of the property taken and damaged. The State contended that the measure of d amages sho uld be restricted to the value of a duplex cabin removed from the property during construction of the bridge.

The case was tried to a jury on January 29 and 30, 1997, on the issue of damages. The State’s only proof related to the value of the ca bin located within the easement granted by the Corps of Engineers. 4 The Appellee presented proof regarding all damage s caused to their

leasehold by the4 (...continued)

subject-matter jurisdiction to adjudicate dam ages. -4- construction, including, but not limited to, the value of the cabin. At the close of pro of, the State moved for a directed verdict on all damage issues, and the Appellee moved for a partial directed verdict in its favor

on all condemnation damage issues except for the value of the cabin. The attorney for the State acknowl

edged that the St

atehad not offered any evidence reg arding any

damage issues other than the value of the cabin, and that there was no evidence in the record from which the jury could derive any damage awards exce pt for those damage figures testified to by the Appellee ’s expert, with the exception of the value of the cabin. The trial court overruled the motion for directed verdict made by the State and granted the Appellee’s motion for partial directed verdict. Based on the unrebutted evidence

introduced in the c

ase, the trial co

urt entered a dir

ected verdict in

favor of the Ap pellee in the amount of $287,115.00. Thereafter, counsel for both parties made closing arguments

to the jury r

egarding the

damages that sho

uldbe awarded for the taking of the cabin. The jury returned a verdi ct in the amount of $52,725.00. Finally, the trial court awarded the Appellee $100,000.00 for attorneys’ fees in lieu of injunctive relief. The trial court re asoned that such an award was the only

way the App

ellee could

have justice for the State’s illegal activities since, but for the State’s actions, the Appelleewould nothave incurred attorneys’ fees. The court ruled that
u pon payment of the $100,000, the property rig hts in the land under the bridge would ves t in th e State, and the Appellee’s right to an injunction would be extinguished.

The State b rings the present appeal claiming error in the partial dire

cted verdict gr

anted in favor of the Appellee, as well as the $100,000 awarded in lieu of injunctive relief. The State does not claim error in the $52,725 jury verdict rendered in favor of the A ppellee. Law and Analysis
We are faced wi

th two claims of err

or in this appeal. The first is the State’s claim that the trial court erred

in the award of $287,115 as condemnation damages. The second issue relates to the trial court’s decision to awar d attorneys ’ fees of $100,00 0 in lieu of injunctiv

e relief. We shall consider each of these claims in turn. I. Condemnation Damages

In support of its claim that the trial court erred in granting the Appellee a directed verdict in the amount of $287,115,

the State basically p

resents three c

ontentions. First, it argues that the trial court lacked jurisdiction to award damages at all. Second, the State con tends that any damages arising from this entire sc

enario resulted not from the State’s building of the bridge, but rather from the granting of the easement to the State by the Secretary of

the Army. Third, the State contends that it did not “take” any leasehold interest of the Appellee other than the improvement constructed upon5 The State appe ars to concede that i

t was requi

red to pay as

damages the val

ue of the ceda

r du plex cabin insofar as no issue is

presented on appeal rega rding the j ury award of $52,725. As we understand t

he State’ s positi

on, this was the only amount which it owed as the cabin was the only par

t of the land taken t

hrough the Sta

te’s power of eminent domain.

6 When we refer to the “Un ited States,” w e are referrin g to the go vernm ental entity represent ed in thi s case by the Secret

ary of the Army.
-5- the land. 5 To some extent, all three of these arguments are inter-related insofar as they involve the role of the United

States. 6

We believe the State’s arguments rest on fundamental mis-characteri z ations of the facts. The Statecontends that the trial court did not have subject matter jurisdiction over the dispute be cause it involved t he construc tion of righ ts gr anted by the United States of America. According to the St ate’s po sition, this dispute could only be adjudicated in a proceeding in a United States District Court. We believ e this argument fails from the outset. The United States, through the Corps of Enginee rs a nd the Secretary of the Army,

certainly had a role in the e

volution of this cas

e as it granted both the lease and

the easement. Ho

wever, that role

did not extend to causing the damages which are the subject o

f this appeal. While

the Corps of

Engineers did grant the State an easement to build the bridge, it did so with the express intent of protecting the Appellee’s lease. The easement
was specifically

designed to be su

bservient to the le

ase, and th

e easem ent required tha

t the State reach an agreement with the leaseholder prior to exercising the rights granted by

the easement. Our review of the record le

ads us to two inesca

pable conclusion

s. Fir st, there was no federal clai m adjudicated

in the trial court,

nor was the United

States a necessa

ry party . The dispute in this c

ase existed solely

betweenthe State o f Tennessee a nd the lease holder, th e Appellee. Second, th e damage caused to the Appellee’s

leasehold was not

the fault of the Un

ited Sta tes. The granting of the easement did not, as the State contends, cause the damage. Ra ther, the illegal exercise of that easement by the State caused the damages.

We can perceive of no claim that the Appellee could have asserted against the United States, andwe summarily reject any ar gument by the State atte mpting to transfer liability. Both of the State’s arguments rest

on the premise tha

t the United States,

through th

e Corps of Eng ineers, is responsible for the damages. There is no support for such a conclusion. The State disregarded an express provision in the easement granted by the Corps of Engineers by not r eaching an

agreement withMildred Harrison prior to building the bridge. The State, not the United State s, built the bridge that caused the damages. It is unreasonable to conclude that the State’s actions are somehow the responsibility

of the United State

s. The easement g

ranted by th

e Corps of Engine

ers c onta ined safeguards which, if

followed, would have protected the Appellee’s interests. The mere granting of the easement did not damage the Appellee’s le asehold. The responsibility for those damages lies squarely with the State. Therefore, we reject any argument advanced by the State which is based on the premise that the U

nited States was, o

r should have bee

n, a party to this action. Accordingly, we conclude that the trial court did have jurisdiction to adjudicate the dispute, and the State’s argument placing respon

sibility on the

United States is with

out merit.7 This argument is based on rather strange l

ogic. TheState cont

ends that the only damage i t caused was t

he damage it le

gally coul

d cause. I

n other words,

the State onl

y took the ceda

r cabin becaus

e that i s the only t

hing it could legally take

. -6- The State’s final argument also re sts on a mis-character ization of its action

s. The State
co nten ds that it only “took” the improvement which had been constructed on the land. 7 In this regard, the State contends that the only damages owed to the Appellee was the value of the c edar duplex cabin

which was remove

d. In rega rd to this argume

nt, we note, with ap

proval, the state

ments of the trial court

:
It is undisputed in this case that the bridge and highway which are under construction completely

dissect th e lease. The S tate has lo cated large massive concret e pillars and abutmentson the land within the leasehold concession. In addition, the State is
cons truc ting an impassable drainage ditch through the middle of the lease. The Defendants assert that persons and property on th e leasehold adjacent to the bridge will potentially be endangered by debris thrown from the bridge. They contend that water on the brid ge is collected into drains which, during heavy rains, concentrate the water into dangerous streams which fall onto their pro

perty from several hundred feet above. They say

they have lost building

sites and dockage space and that the road and bridge have damaged the value of their lease, both within and outside the area of the proposed easeme

nt.
Based on the pl ans f

or the construction filed in court and on the admissions of the Statein open court, it is o bvious that the State ’s posi tion that it is not taking any leaseh old inter est except for impr ovement is a falla

cy. The Stat

e asks this court to pr etendthat the defendants will not suffer and damages, except to impro vements , because the State, by its own admission, had no power to take or dama ge the defendants’ leasehold. The fact, however, that the State did not have power to take does n ot change the reality of the fact that th

e State did take, a

nd is continuing to take, leasehold rights and that the construction and operationof the bridge damages the defendants’ economic rights in their leasehold over and above the value of their improvements. The State’s positio n that it is attempting to

take only imp

rovements cannot be reconciled to the reality of the plans and the actual c onstruction. (emphasis

added). The trial court accurate ly stated the

complete fallac

y of the pre

sent argument. Regardless

of what the state could take, or thought it was taking, the conclusion is inescapable that the construction of the bridge damaged the Appellee far bey ond removing the cabin.

In summary, we

find no merit in

the State’s argument that the trial court lacked jurisdiction to adjudicate the issue of damages to the Appellee’s leasehold. Similarly, we r eject the Sta te’s argument that they we

re not resp onsible forthe damages sustained by the Appellee. Finally , we believe it to be clear

that the State caused d

amages bey

ond those associa

ted with the improve

ments-7-

constructed

on the leasehold. As such, we find no error in the trial court’s granting of the Appellee’s motion for partial

directed verdic

t. II. Attorneys’ Fees

The remaining issuefor our consideration is the question of whether the tria

l court erred in awarding the Appellee $100,000 in lieu of injunctive relief. The State argues that there is no aut hor ity, statutory or

otherwise, upon w

hich to base this

award. The Appellee argues that this award is sustainable because there was no other method thro ug h which the trial c

ourt could compen

sate it for the actions of the State.

We certainly sympathize with the plight of the Appellee in this ca se. However , we must agree with the State’s argument that there is no basis for the trial court to have awarded the attorneys’ fees in l ieu of i nju nct ive rel ief . Th e Ap pel lee has not poi nte d to any a uthor ity which would allow us to sustain the awar d. Whi le we recognize the ends which the trial court was attempting to achieve, we are unable to approve of the means absent some authority. While no issue has been presented regarding the injunction, we note that an injunction is an available r emedy in
cases such as the present. The fact that an injunction was not feasible in this case does not allow the court to substitute remedies. The Appellee dropped their request for an injunction, and we can find
no aut hor ity w hic h wo uld all ow t hem an al ter nat ive rem edy. Therefore, we are bound to conclude that the trial court erred in awarding the Appellee atto

rneys’ fees of $100,000 in lieu of injunctive relief.
Conclusion

For the foregoingreasons, the decisionof the trial court granting the Appellee’s motion for partial directed verdict and awarding $287,115 as condemnation damages is affirmed. The award of $100,000 in lieu of i

n junctive relief i s hereby reversed. Costs of this appeal are taxed to the Appellant, State of Tennessee, for which execution may issue if necessary

.

___________________________________ ALAN E. HIGHERS, JUDGE